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Fair Value Measurements | 3 Months Ended
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Dec. 31, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements The FASB has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy consists of three broad levels. Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability. The carrying values of financial instruments comprising cash and cash equivalents, payables, receivables, related party accounts receivable and accounts payable, and advances from joint interest owners approximate fair values due to the short-term maturities of these instruments. The carrying value reported for the revolving line of credit approximates fair value because the underlying instruments are at interest rates which approximate current market rates. The revolving line of credit is considered a Level 3 measurement. Assets and Liabilities Measured on a Recurring Basis The fair value of commodity derivatives and interest rate swaps is estimated using internal discounted cash flow calculations based upon forward curves. The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2021 and September 30, 2021, by Level within the fair value hierarchy:
| December 31, 2021
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (In thousands)
Financial assets: |  |  |  |  |  |  |
Commodity derivative assets | $ | — |  |  | $ | 187 |  |  | $ | — |  |  | $ | — |
Interest rate assets | $ | — |  |  | $ | 361 |  |  | $ | — |  |  | $ | — |
Financial liabilities: |  |  |  |  |  |  |
Commodity derivative liabilities | $ | — |  |  | $ | (40,687) |  |  | $ | — |  |  | $ | — |
Interest rate liabilities | $ | — |  |  | $ | (10) |  |  | $ | — |  |  | $ | — |
| September 30, 2021
| Level 1 |  | Level 2 |  | Level 3 |  | Total
| (In thousands)
Financial assets: |  |  |  |  |  |  |
Commodity derivative assets | $ | — |  |  | $ | 308 |  |  | $ | — |  |  | $ | — |
Interest rate assets | $ | — |  |  | $ | 106 |  |  | $ | — |  |  | $ | — |
Financial liabilities: |  |  |  |  |  |  |
Commodity derivative liabilities | $ | — |  |  | $ | (51,336) |  |  | $ | — |  |  | $ | — |
Interest rate liabilities | $ | — |  |  | $ | (48) |  |  | $ | — |  |  | $ | — |
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis Assets and liabilities accounted for at fair value on a non-recurring basis in accordance with the fair value hierarchy include the initial recognition of asset retirement obligations, the fair value of oil and natural gas properties, and goodwill when acquired in a business combination or assessed for impairment. The fair value measurements of assets acquired and liabilities assumed are measured on a non-recurring basis on the acquisition date using an income valuation technique based on inputs that are not observable in the market and therefore represent Level 3 inputs. Significant inputs used to determine the fair value include estimates of: (i) reserves; (ii) future commodity prices; (iii) operating and development costs; and (iv) a market-based weighted average cost of capital rate. The underlying commodity prices embedded in the Company's estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that the Company’s management believes will impact realizable prices. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation. The fair value of asset retirement obligations incurred and acquired during the three months ended December 31, 2021 and year ended September 30, 2021, totaled approximately $56 thousand and $113 thousand, respectively. The fair value of additions to the asset retirement obligation liabilities is measured using valuation techniques consistent with the income approach, which converts future cash flows to a single discounted amount. Significant inputs to the valuation include: (i) estimated plug and abandonment cost per well for all oil and natural gas wells and for all disposal wells; (ii) estimated remaining life per well; (iii) future inflation factors; and (iv) our average credit-adjusted risk-free rate. These assumptions represent Level 3 inputs. If the carrying amount of our oil and natural gas properties exceeds the estimated undiscounted future cash flows, we will adjust the carrying amount of the oil and natural gas properties to fair value. The fair value of our oil and natural gas properties is determined using valuation techniques consistent with the income and market approach. The factors used to determine fair value are subject to management’s judgment and expertise and include, but are not limited to, recent sales prices of comparable properties, the present value of future cash flows, net of estimated operating and development costs using estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, and various discount rates commensurate with the risk and current market conditions associated with the expected cash flow projected. These assumptions represent Level 3 inputs.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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